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It has felt like typical summer trading* the past few weeks in the market – very light volume with little volatility. As mentioned yesterday almost all of 2013's gains have come on the first day, with most of it in the first hour in fact on the big gap up post fiscal cliff "resolution". Since then it's just been a lot of flopping around like a fish out of water. Thinking back this reminds me a lot of August 2012. Circumstances are different – i.e. June and July 2012 were very volatile as European sovereign debt risks dominated, ending in Draghi's "whatever it takes" comment in late July and a better than expected jobs report on August 3 leading to a large gap up and then…. a large sucking up of volatility out of the market, with little movement the rest of that month. Sound familiar? November and December 2012 were very volatile as fiscal cliff negotiations dominated, ending in a kick the can solution and then…. a large sucking up of volatility out of the market, with little movement (thus far!)

With earnings season ahead I'd expect some more volatility to be reintroduced into the market go forward in January but until today there has been very little movement in terms of intraday ranges day to day. We are opening weak on (pick a concern such as German GDP), so we shall see if buyers step in as they have almost every afternoon in January. The big guns begin reporting Wednesday. Technically the bottom end of this ascending channel the S&P has been riding since mid November – absent that major headfake down on the fiscal cliff talk breakdown – is in the upper 1450s. The ultimate gap fill to close the opening created on Jan 2 is in the 1426s (not shown on chart above unfortunately).

Retail sales are out this morning for December but I'm more interested to see how things shake out in a few months as the payroll tax holiday evaporation hits pocketbooks. I had been surfing some related stories online this weekend to read the comments section and it's pretty shocking how so many are surprised by this event and even more how many people are furious they are "being taxed more". It is also annoying to hear how "taxes have gone up for 77% of Americans" due to the fiscal cliff solution. Nah, taxes went back to normal for 76%+ of people and taxes went up for about 1%. Perhaps a little card should have been handed out 2 years ago during payroll saying "you are getting a temporary 2% FICA reduction, enjoy!" and then the parallel card should have been given out this last pay period saying "we are going back to the normal FICA deduction, this is not a new tax." This payroll tax is "only" about $110B of spending a year but my assumption is most who got it spent it, hence the multiplier effect should be quite substantial – so the impact on spending in the next 2-3 months will be interesting.

*summer trading in years there is not major headline risk

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Any securities mentioned on this page are not held by the author in his personal portfolio.